President Donald Trump’s new idea of offering homebuyers 50-year mortgages to reduce costs would likely lead homeowners to pay more in the long run, Maine home affordability experts say.
The Trump administration’s pitch, floated earlier this month on Truth Social, proposes offering homebuyers a 50-year mortgage to pay off the loan for their new property, as it would lead to smaller monthly payments and make homeownership more attainable for more Americans who are priced out of the market.
The median cost of a single-family home in Maine reached more than $401,000 as of last month, putting the dream of homeownership out of reach for many. That’s a stark difference from five years ago when the average price of a home in Maine hovered around $265,000.
A plan that could lower monthly mortgage payments can seem appealing, especially in southern and coastal Maine where average housing prices have skyrocketed in recent years while median incomes haven’t kept up, said Laura Mitchell, executive director of the Maine Affordable Housing Coalition.
But a 50-year mortgage “is really setting people with those with those lower incomes up for a bad investment and something that they’ll never work their way out of,” Mitchell said.
That’s because homeowners with a 50-year mortgage would be paying off their debt for far longer and building more interest during that time than if they had a 15- or 30-year mortgage, Mitchell said.
“The total amount that you pay is way higher than the actual value of the home will ever be because you’re paying way more in interest,” Mitchell said. “It makes it a bad investment because you’re never going to have ownership within your lifetime and you’re paying more towards the cost of the home.”
Someone buying a $400,000 home with a typical 20% down payment and an interest rate of slightly under 6.5% would have monthly mortgage payments of about $2,700 over the 30-year loan term, according to Nerdwallet, a personal finance company.
At the end of the 30-year life of the loan, the homeowner will pay $727,000 for the house. Of that, $407,000 will go toward interest.
If someone were to opt for a 50-year fixed-rate mortgage on a $400,000 house with the same interest rates, the monthly mortgage payments would be roughly $250 cheaper than if they had a 30-year mortgage, according to Al Butler, senior vice president and director of special assets at Camden National Bank.
While that may help some homeowners in the short term, Butler said they’ll wind up paying $500,000 more in interest over the life of the deal.
“We just aren’t seeing any advantage to this,” Butler said of Trump’s idea. “We have to get more creative with providing affordable housing than longer term mortgages. We just don’t think that’s the right route at this point.”
Further details on Trump’s idea, such as what the interest rates on a 50-year mortgage would be, are still unclear, Butler said.
Mitchell and Butler agreed it’s time to think of new ways to make homeownership more affordable to more Mainers, but longer mortgages likely aren’t the solution. Instead, they pointed to lowering the cost of home construction materials and labor as more assured ways to lower home prices.
The 50-year mortgage idea also comes at a time when the average age of first time homebuyers has crept up to 40 nationwide, according to the National Association of Realtors. This means a 50-year mortgage could “set people up to be in debt beyond their lifespan and not actually gain the equity and freedom of home ownership that’s the American Dream,” Mitchell said.